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Development of the rubber industry in Malaysia

Development of the rubber industry in Malaysia

10 Sep 2020

A tourist attraction in Kuala Kangsar, Perak, located near the District Office, is believed to be the first rubber tree planted in Malaysia, in 1877. It was one of the nine seedlings brought over by Henry Nicholas Ridley, who became director of The Singapore Botanic Gardens in 1888. Ridley was instrumental in the development of rubber plantations in Malaysia, then known as Malaya.

According to the website of Economic History of Malaya (EHM), a project run by the Asia-Europe Institute of Universiti Malaya and led by Perak ruler Sultan Nazrin Shah, natural rubber was a critical pillar of Malaysia’s export-oriented economy throughout much of the 20th century.

“The massive boom in rubber trade came in the first decade of the 20th century as prices rose as a result of the spectacular upsurge in demand from the US automobile industry and the related demand for rubber tyres.

“As global demand for natural rubber increased and rubber prices rose sharply towards the end of the first decade of the 20th century, rubber planting became highly profitable and rubber plantations spread across the Malay Peninsula. Initially, most rubber planting took place in Perak, Selangor, Negeri Sembilan and Johor — states where infrastructure already existed and was expanding,” says EHM.

It adds that high prices also encouraged smallholders to plant rubber instead of cultivating rice and doing other subsistence farming.

“By the 1930s, Malaya had become the world’s largest natural rubber producer. The use of an improved method of tapping to extract the maximum flow of latex with the minimum damage to trees helped increase supply,” says EHM.

According to EHM, apart from the period under Japanese rule, Malaya’s share of the world’s supply of rubber did not fall below 30% until the late 1980s.

The role of RRIM and the introduction of SMR

The Rubber Research Institute of Malaysia (RRIM) was established in 1925. Its first headquarters was in Jalan Damansara, Kuala Lumpur, and it opened an experiment station in Sungei Buloh in 1927.

A breakthrough for the industry was the introduction of the Standard Malaysian Rubber (SMR) scheme in 1965 by RRIM, which revolutionised the presentation, quality and marketing of natural rubber. Under this scheme, rubber is graded based on technical specifications instead of the traditional visual grading system used for rubber sheets and remilled crepes. It is essentially a quality control scheme that guarantees standards and improves marketing so as to compete with the synthetic rubber industry.

One of Malaysia’s most prominent rubber scientists was the late Tan Sri Dr B C Sekhar, the Asian director of the RRIM in 1966. Sekhar was directly involved in the invention and subsequent development of the SMR process.

Plantation companies exiting rubber plantations

Malaysia was the world’s largest producer of natural rubber in the 1960s and 1970s but, since then, the hectarage has consistently declined. It is now the fifth- or sixth-biggest producer of natural rubber globally after Thailand, Indonesia, Vietnam, India and China, says rubber expert Dr Sivakumaran Seenivasagam.

“A significant reduction in natural rubber hectarage is due to large plantation companies exiting because of conversion to oil palm, which is more profitable per hectare and less labour-intensive (12ha per harvester for oil palm compared with 6ha per tapper based on tapping done once in three days), thus requiring much less labour and being less prone to disease.

“Managing a rubber plantation is more challenging and daunting when compared with an oil palm plantation,” he says.

In a recent interview with The Edge, FGV Holdings Bhd group CEO Datuk Haris Fadzilah Hassan said the group was looking to move away from natural rubber to green rubber.

“We still have 11,000ha of rubber [trees], but I must confess that it is a struggling business. We are working with tyre manufacturers like Toyo and Dunlop to produce green rubber, which has the same properties as synthetic rubber in terms of durability, but is still supple enough to be used,” he says.

How glovemakers have evolved

The evolution of the glove manufacturing is an interesting story, says Pong Kai See, immediate past president of the Plastic and Rubber Institute Malaysia, in his article titled “An Overview of Malaysian Rubber Industry — Past, Present and Future”.

“When the AIDS epidemic in the 1980s drove up the demand for medical gloves, many countries, including the US, Taiwan, China, South Korea, Thailand, Indonesia and Malaysia, responded by ramping up production capacity.

“Malaysia came out a winner, owing as much to ready availability of latex (at the time) as to the know-how and entrepreneurship to handle all aspects of glove production. We have since leveraged this advantage to become the leading player in glove machinery, former production, latex technology and in nitrile latex production,” Pong writes.

Sivakumaran says three important factors — government policies in the 1970s and 1980s; the important role played by the Malaysian Investment Development Authority (MIDA); and early R&D carried out by Lembaga Getah Malaysia (LGM), or the Malaysian Rubber Board, on gloves — helped propel the sector.

“The government granted pioneer status and a five-year tax-free break for companies interested in going into glove manufacturing and MIDA very liberally made available 600 licences, of which 300 were initially taken up and which now have consolidated to 57 manufacturers. The Chinese entrepreneurs and captains of industry took advantage of the government policies and invested heavily in this sector.

“LGM was able to give strong technical support to the glove manufacturers in addressing and resolving problems encountered in the manufacture of gloves. In particular, LGM did considerable research and development work to tackle and address the issue of allergy to gloves manufactured from natural rubber latex,” he says.

Has the sun set on the rubber industry?

Sivakumaran believes the natural rubber industry is not a sunset industry.

“It is not because of its great importance to rubber-based product manufacturing sectors such as medical gloves, automotive, engineering applications, consumer products and rubberwood-based value-added products.

“Although income for the country that comes directly from the export of raw materials from rubber may not be very significant, the contribution from the export of finished rubber products to national GDP is very significant. Thus, the natural rubber industry is still important for the country,” he says.

Source: The Edge Markets Posted on : 10 September 2020

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